Getting a business loan without a business plan: Is it possible?

A business plan serves as a roadmap for your business’s future and communicates your vision to others, including lenders. But you may be wondering if you can get a business loan with a plan for your business strategy. You might be surprised to learn that no business plan loans and other funding do exist — but there are risks involved with them.

This article explores which financing and loans without a business plan are available, the importance of a business plan, the risks involved, and when you should consider taking out funding without a business plan to help you find what your business needs.

The importance of a business plan and why lenders typically require one

A business plan is a comprehensive document that outlines the goals, strategies, and financial projections of a business. A business plan is important for many reasons, including that it demonstrates your business’s viability. A well-prepared business plan shows lenders the potential success of the business because it shows that the small business owner has done their research on things like:

• Market analysis
• The competitive landscape
• The target audience
• The unique value proposition of the business
• Operational plan
• Potential challenges the business may face

When you apply for small business loans, business lenders want to make sure that your business has a solid foundation and a realistic chance of generating enough cash flow to repay the loan. Understanding these aspects of a business helps lenders mitigate risk, which is where a business plan comes in. 

A business plan includes financial projections. Financial outlooks showcase the expected revenue, expenses, and profitability of the business over a specific period. Lenders require this information to assess the borrower’s ability to generate enough income to cover loan repayments. The financial projections also help lenders evaluate the business’s ability to manage cash flow and achieve profitability.

A professionally prepared business plan also enhances the credibility of the borrower. It shows that the small business owner has invested time and effort into thoroughly researching and planning the business.

Overall, a well-prepared business plan may not only increase the likelihood of securing financing, but also demonstrates the borrower’s commitment and professionalism.

Can you get a business loan without a business plan?

It may be possible to get a business loan without a business plan — but it can be challenging. Traditional lenders like the Small Business Administration (SBA), banks, or credit unions typically require full business details, but alternative lenders may offer loans without requiring a formal business plan. However, they typically have other requirements or may charge higher interest rates to make up for the increased risk. Without a business plan, lenders have less information to evaluate the viability and potential of the business, so they may seek other forms of security.

Alternative lenders often have more flexible requirements compared to traditional banks. They may consider factors like revenue, personal and/or business credit scores, and time in business rather than insisting on a comprehensive business plan. Thus, it may be difficult to get one of these loans with low revenues or bad credit.

While it may be possible to obtain a business loan without a business plan, it’s still a good idea to write a business plan for other reasons. It provides a roadmap, outlines goals, and helps you make informed decisions about your business’s future. It can increase your chances of securing a loan with better terms and conditions, as well as help you navigate the challenges and opportunities of running a successful business.

Alternative options for securing business funding

If you’re looking for alternative business funding beyond traditional bank loans, there may be several options available to you, often from online lenders. Here are some alternative funding and loan options for businesses:

Business cash advance

A business cash advance (BCA), or merchant cash advance (MCA), is a form of financing where a business receives a lump sum payment upfront in exchange for a percentage of its future credit card sales. Rather than a traditional loan with fixed monthly payments, a merchant cash advance involves repaying the advance through a portion of the business’s daily credit card transactions. You may also be able to get a business cash advance even if you don’t have credit card sales and operate as a cash-based business.

It is important to note the high cost and potential impact on cash flow of a BCA. The holdback percentage can reduce the business’s available working capital, and the effective interest rate (represented by the factor rate and fees) can be significantly higher than other financing options. Make sure you understand all the terms and fees before applying for a business cash advance.

Equipment financing

Equipment financing is a type of business financing that specifically focuses on acquiring or leasing equipment needed for operations. It allows businesses to get necessary equipment without having to pay the full purchase price upfront. Instead, the equipment is financed through a loan or lease arrangement, which is repaid over time with interest or lease payments. 

Overall, equipment financing offers businesses a flexible and accessible way to buy or lease the equipment they need to operate and grow. It’s important to carefully review the terms, interest rates, repayment structure, and other conditions of the financing agreement to ensure it aligns with your business’s needs and financial capabilities.

Invoice financing

Invoice financing, also known as invoice factoring or accounts receivable factoring, is a financing option where a business sells its outstanding invoices to a third-party financial company, known as a factoring company. The factoring company then advances a percentage of the invoice value to the business upfront, typically around 80% to 90%, and assumes responsibility for collecting the payment from the customers. 

However, it’s important to note that invoice factoring may not be suitable for all businesses. Factoring companies consider the creditworthiness of the business’s customers, and if they have poor credit or a history of late payments, it may affect the factoring company’s willingness to advance funds or result in higher discount fees. It’s a good idea to carefully evaluate the costs and terms associated with invoice factoring and consider alternative financing options before making a decision.

Crowdfunding

Crowdfunding platforms enable businesses to raise funds by collecting small contributions from a large number of individuals. There are different types of crowdfunding, including donation-based crowdfunding, reward-based crowdfunding, equity crowdfunding, and debt crowdfunding. Each type has its own set of rules and requirements, so it’s important to research and choose the most suitable option for your business.

Grants

Certain organizations, government agencies, and foundations offer business grants to support businesses in specific industries or for specific purposes, such as research and development, environmental sustainability, or community development. Businesses typically don’t have to pay back grant funds, but the application process can be highly competitive and requires a clear alignment with the grant’s objectives.

It’s important to carefully evaluate each funding option and consider factors such as eligibility criteria, repayment terms, interest rates, equity considerations, and the impact on your business’s long-term goals. You may also want to seek professional advice from financial advisors, consultants, or industry experts to help you navigate the funding landscape and choose the best option for your business.

Other options to look into are microloans and business credit cards.

Alternative funding options for businesses without a formal business plan

You may be able to qualify for some of the options below if you don’t have a business plan. They tend to look more at time in business, revenue, and credit score but may have stricter requirements for certain applicants.

Business cash advances

Apply now

Business Cash Advance by Credibly

Credibly offers flexible repayment plans with fixed rates, based on future receivables. Ideal for seasonal businesses and those with high credit card processing volumes.

Pros

• Fixed payments
• Offers the ability to pre-qualify without affecting your credit.

Cons

• Must have at least $25,000 a month in sales, Max repayment term is 15 months

Funding Amount

$5,000 - $600,000

Cost

Factor rates as low as 1.11

Repayment Terms

Daily debits from your bank account for 3 to 18 months

Funding Speed

As quickly as 4 hours

Show details

Apply now

Business Cash Advance by Rapid Finance

A viable option for businesses looking for growth capital up to $600,000. Costs will vary based on your risk profile. This is a good product to get your foot in the door with a lender, with growth opportunities with Rapid Finance’s other products

Pros

• Application is quick and easy Receive funds within hours of approval No business lien placed Flexible repayment options. Direct split-funding available with many popular credit card processors

Cons

• Not ideal for startup or low monthly revenue businesses Requires an established business bank account

Funding Amount

$5,000-$600,000

Cost

Factor Rates as low as 1.09

Repayment Terms

Estimated payment terms of 4-12 months

Funding Speed

1-3 days

Show details

Equipment financing

Crest Capital

Crest Capital offers equipment financing up to $250,000 to established small businesses without showing their financials. You can apply online and get a decision within four hours in most cases. 

Balboa Capital

Small business owners can get up to $500,000 in equipment financing from Balboa Capital. The application is digital and can offer approvals within one hour. 

CIT Bank

You can get up to $500,000 from First Citizens Bank Equipment Finance without having to show your financials. Funding speed can be as quick as one day after applying. 

*All information about Crest Capital equipment financing, Balboa Capital equipment financing, and the First Citizens Bank Equipment Finance has been collected independently by Nav. These products are not currently available through Nav. To see what financing options are available, please visit Nav’s lending page.

Invoice factoring

TCI Business Capital

Like other factoring companies, TCI Business Capital uses the credit and payment history of your customers to decide whether to advance on an invoice rather than your business plan or financials. 

FundThrough

FundThrough is a well-rated factoring company that works with businesses with at least $100,000 in outstanding invoices or accounts receivable. The company doesn’t work with real estate or construction companies, however.

Riviera Finance

Riviera Finance will pay up to 95% of your invoice balance and works with a variety of industries. You can get funding in as little as 24 hours. 

*All information about TCI Business Capital invoice factoring, FundThrough invoice financing, and Riviera Finance invoice financing has been collected independently by Nav. These products are not currently available through Nav. To see what financing options are available, please visit Nav’s lending page.

What lenders look for

Let’s look at what lenders traditionally look for when considering a funding application.

1. Creditworthiness: Traditional lenders often assess the creditworthiness of both the business and its owners.
2. Financial statements: Traditional lenders scrutinize the financial statements of the business, including income statements, balance sheets, and cash flow statements. However, there are funding options mentioned above that may not need to consider your financials.
3. Time in business: If you’re a brand new business or a startup, it will likely be more difficult to get a business loan. However, there are some loans that require only three to six months in business before extending financing.
4. Business plan and purpose of the loan: Traditional lenders look for a well-prepared business plan that outlines the purpose of the loan and how it will be utilized to benefit the business. And as mentioned, there are options that might not need to see your business plan.
5. Collateral and personal guarantees: For secured loans, lenders may require collateral that can be used to recover the loan amount in case of default, like real estate, inventory, equipment, or accounts receivable. 

Lenders may need more information and details from you before approving your application.

How to improve your loan application

Improving your loan application can increase your chances of securing financing and potentially lead to more favorable loan terms. Here are some tips to help you enhance your loan application:

• Review and strengthen your credit profile: Lenders assess your creditworthiness by reviewing your credit history and credit score. Get a copy of your credit report and check for any errors or discrepancies. Address any outstanding debts or delinquencies, and make timely payments to improve your credit score. Learn how to establish business credit from Nav’s guide.
• Prepare a comprehensive business plan: A well-prepared business plan showcases your understanding of your industry, market, and competition, as well as your strategies for growth and profitability. Although it’s not necessary to have a business plan for all financing, it may increase your chances or unlock financing options that you otherwise may not have access to.
• Organize your financial documents: Lenders typically require various financial documents to assess your financial health and repayment capacity. Gather and organize documents such as bank statements, tax returns, financial statements, and any other relevant records. Make sure these documents are up to date, accurate, and complete.
• Improve cash flow and profitability: Lenders consider your business’s ability to generate sufficient cash flow to repay the loan. Take steps to improve your cash flow by managing expenses, optimizing pricing, and increasing sales. Implement strategies to enhance profitability, such as reducing costs, improving operational efficiency, or diversifying revenue streams.
• Offer collateral or a personal guarantee: Providing collateral or a personal guarantee can strengthen your loan application, especially for secured loans. Collateral, like property or equipment, serves as a form of security for the lender. A personal guarantee, where you personally assume responsibility for loan repayment if your business fails to pay it back, demonstrates your commitment and can mitigate the lender’s risk.
• Build a relationship with the lender: Establishing a relationship with the lender before submitting your loan application can be beneficial. Schedule a meeting or phone call to discuss your financing needs, demonstrate your professionalism, and gain a better understanding of the lender’s requirements. Building a rapport can enhance your credibility and increase the lender’s confidence in your application. Also, consider opening a business bank account to establish yourself with the financial institution. 

Remember, each lender may have specific criteria and preferences, so tailor your application to their requirements. 

The risks of getting a business loan without a business plan

Obtaining a business loan without a business plan can expose you to several risks and challenges. First, you’ll have inadequate financial projections that lenders use to assess the viability and repayment capacity of your business. Thus, lenders may be hesitant to provide funding or may offer less favorable loan terms due to the lack of clarity on your business’s financial future.

Also, you might have difficulty communicating your business to lenders. A business plan provides a comprehensive overview of your business, including its mission, vision, target market, marketing strategies, and financial projections. Without a plan, it can be challenging to articulate your business’s value proposition and convince lenders of its potential for success. 

A business plan also often includes contingency plans to address potential risks and challenges that may arise. These plans outline alternative courses of action and risk mitigation strategies. Without a plan, you may be ill-prepared to handle unexpected events or market changes, which could have a significant impact on your business’s financial stability and loan repayment ability.

A final note

Having a business plan doesn’t guarantee loan approval, but it significantly enhances your chances of securing financing and obtaining favorable loan terms. A well-prepared business plan demonstrates your commitment, understanding, and preparedness for the challenges and opportunities your business may face. However, you may be able to secure business funding without a business plan. Use Nav to find curated financing options today.